Project 2: Don and Joe went into business together as equal co-owners. Joe had a lot of money but no business sense and Don had the know how. Don and Joe each invested $10,000 and Joe directly loaned the business $90,000 (Business did not assume a loan Joe owed to third party) . Chase loaned the business another $100,000 after Joe and Don both agreed to guarantee the loan.

In the first year, as is typical, the business struggled and incurred ordinary operating income of $50,000, excluding the payment promised to Don of $65,000 annually for his labor. The business earned interest income of $2000, a short term capital loss of $4000, and made qualified charitable contributions of $1000.

In the second year of business ordinary operating income was $32,000. including the promised amount for Dons labor. The business earned $1200 in interest income and incurred a $1500 capital gain and paid $2500 in qualified charitable contributions. Joe was repaid $10,000 for his loan and Chase received $3000 in principal payments. An equal distribution of $4000 was made to each owner.

Calculate both owners at risk basis at year end for both years, showing all your work (1) first assuming the entity is a partnership and (2) second assuming it is a S Corporation. Please follow the format provided here.

Year 1 Partnership Year 2

Joe Don Joe Don

Beg Basis

Property Contributed

Liability Increase

Liability Decrease

Ordinary Income/Loss

Separately Stated Items (in order presented in facts please)

Distributions

Ending basis

Year 1 S Corporation Year 2

Joe Don Joe Don

Beg Basis

Property Contributed

Liability Increase

Liability decrease

Ordinary Income/Loss

Separately Stated Items (in order presented in facts please)

Distributions

Ending basis